Gruber also mentioned that the mini version will use the same display technology as the iPhone 3GS. He came to this conclusion because Apple can produce this type of screen efficiently and affordably.

"Here’s the logic behind such a display," said Gruber. "Displays aren’t manufactured at their finished size; rather, they’re made on big sheets, and then cut to size. I believe the iPad Mini (or whatever it’s going to be called) uses the same display as the iPhone 3GS. So instead of cutting these sheets into 3.5-inch 480 × 320 displays for the iPhone 3GS, they’ll cut them into 7.85-inch 1024 × 768 displays for the smaller iPad. Same exact display technology, though — display technology that Apple has been producing at scale ever since the original iPhone five years ago."

The iPad Mini is meant to help Apple compete with the likes of Amazon's Kindle Fire, which is a 7-inch Android-powered tablet that was released last November for only $199. The Fire ended up being a smash hit during the holiday season, where Amazon moved 4.7 million units during Q4 2011. This is nearly a third of Apple's iPad volume during that same period, which moved 15.4 million units. Apple needs to stay on its toes when it comes to Amazon's Fire competitor, because a new Kindle Fire is reportedly on the way as soon as this month, and it's expected to have more features like exterior volume controls and a camera.

Amazon isn't the only competitor to keep an eye on, though. Google just started taking orders for its 7-inch Nexus Tablet, which will be the first to feature Google's Android 4.1 Jelly Bean mobile operating system. The other specs include a 1.3 GHz quad-core Tegra 3 processor, a GeForce 12-core graphics processor, 1 GB of RAM and a resolution of 1280x800. The 8 GB model will sell for $199.

While Microsoft's latest Surface tablet announcement isn't exactly in the $199, 7-inch category, it should still be a noted Apple competitor. The new Surface tablets will be 10.6 inches with a 3 mm fold-out keyboard that doubles as a case, and a thin 9.3 mm frame. It comes in two different versions, including the Windows RT model with a Tegra 3 processor and 32/64 GB SSD options, and the Windows 8 Pro model with Intel Corp's Core i5 Ivy Bridge processors and 64/128 GB SSD options.

Umm I am pretty sure apple does not produce anything. They buy parts from LCD manufacturers. What they mean to say is LG will sell us these cheap. And because it is the first sub 500 new iPad our fans will buy it.

"It looks like the iPhone 4 might be their Vista, and I'm okay with that." -- Microsoft COO Kevin Turner